UK Biotech Funding Falls 49% as Sector Struggles to Scale Despite Industrial Strategy Priority

UK biotechs are struggling to access finance, with British equity financing and venture capital dropping 49% and 13% respectively in 2025 compared to 2024, according to a report from the British BioIndustry Association (BIA). The decline comes despite the UK Government's 2025 Modern Industrial Strategy naming life sciences among its eight priority sectors, alongside advanced manufacturing, defence, and clean energy.

In an industry roundtable with representatives from British biotechs, access to finance was highlighted as the most urgent barrier to growth. While the UK biotech sector is amongst the largest in Europe, a lack of large domestic investors and slow NHS adoption of innovation means the UK may not be able to capitalise on its competitive advantage. According to the Association of the British Pharmaceutical Industry (ABPI), the UK is at risk of losing its world-leading life sciences status due to investment being captured elsewhere on the international stage.

Via the BIA, the industry has called for a £500m cash injection from UK pension funds in 2028, a prioritisation of life sciences in the British Business Bank strategy and British Growth Partnership, and more involvement from ministers in securing investment from institutional investors. Maintaining and enhancing R&D tax reliefs was also underlined at the roundtable, along with calls for a stronger commercial pathway for startups, improved NHS data and clinical trial prioritisation, and improved medicine access.

On the regulatory front, the Medicines and Healthcare products Regulatory Agency (MHRA) is introducing a more flexible pathway for approving rare-disease treatments by authorising overarching techniques rather than necessitating approval for individual products, a shift that promises to cut costs and reduce delays. The UK also hosts over half of Europe's advanced therapy clinical trials. The recently agreed US-UK pharma trade deal secured zero tariffs on pharmaceutical products, with the UK committing to spend more on new NHS drugs, although an analysis published in the British Medical Journal has questioned the economic efficiency of the deal.

Despite funding challenges, the sector retains significant strengths. Greater Manchester is one of the UK's leading life sciences regions, with consistent growth above the UK average for more than a decade. The region provides a secure health data environment for 2.8 million people, one of the UK's largest clinical trial pools, and Europe's largest single-site cancer hospital, The Christie NHS Foundation Trust, which treats more than 60,000 patients annually. Greater Manchester was among the first NHS regions to deliver CAR-T cell therapy and hosts one of the NHS's seven Genomic Laboratory Hubs, and has been named an 'exemplar site' by the UK Government for the development and deployment of new diagnostics.

The pharmaceutical industry is critical to the UK Government's long-term plans, contributing £17.6bn in direct gross value added (GVA) annually to the economy. Analysts expect the global economic impact of biotech to exceed $2 trillion by 2030. However, AI-enabled drug discovery is moving too slowly; traditionally 90 per cent of drug candidates fail early, but AI has already doubled success rates. Companies frequently find their innovations cleared for use overseas long before they are authorised domestically, a regulatory mismatch that discourages innovators from staying. Speaking at the roundtable, the under-secretary for health and social care said that life sciences is 'one of Britain's great success stories' and that the challenge is to turn discovery into companies that have the confidence to start, scale and stay in the UK.

Reflecting the policy momentum, US-based programme management and PMO consultancy MustardSeed is launching UK operations to help organisations in life sciences and advanced manufacturing deliver on the industrial strategy. The firm says it is already in active discussions with more than a dozen current and prospective clients across the UK and broader European geography.